1) What can I expect to pay for a startup?
I assume you mean how much money will it take to create a practice from scratch, that's a wide range driven by size, location, type of equipment, buildout, number of ops to begin, etc. That said I’d say no less then $250k and as much as $500k. In your area I’d have to offer a guess of approximately $300k-$350k as a good target.
2) How much of the practice should be purchased in cash?
As little as possible, especially with the low interest rates today. Cash is king, try to preserve your cash which means if you can find a lender willing to lend 100%, take it. There are lenders that will do that.
3) Should the entire practice be purchased in cash?
4) What does my cash flow need to be for a startup? (Assuming 1-2 op, one assistant and possibly a hygienist to start)
I’m not sure what you're asking? Are you asking what to expect in terms of initial monthly overhead expenses which drives what you need to collect to break even? If so, again, it's a wide range, however, based on 1-2 ops, 1 assistant I’d have to say no less than $10k a month, probably closer to $15k plus per month. That includes the rent, debt service, labor, insurance, supplies, utilities, marketing\advertising, etc.
5) How far ahead should I start planning?
It’s NEVER to early to start planning. start finding out what it cost per square feet to build out, what it cost to equip a room, technology, labor rates, rent per square feet in the area you want to practice, etc. There's so much you can do a year or two before you begin to help the process go that much smoother. In fact, it wouldn't hurt to begin building your business plan along with creating a forecast of your future practice NOW even though you may not need it for another year or two. You’ll always be tweaking it, even when you're in the heat of it.
Good luck!
So it wouldn't be a good idea to put in more cash to possibly lower the debt service and cash flow requirement?
Not necessarily. You’re usually better of keeping your excess cash available for emergencies, funding ret plans, saving, etc.
Imagine using most of your cash simply to reduce your monthly debt service, things don't go so well and you need more cash, do you think a lender will be eager to lend you more? Usually not, not nearly as eager as they can be at the beginning, I’ve seen it many times. If things don't go as planned and you've stashed some cash away you have more options.
Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com
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